The purpose of this thread is to try to develop manual trading methods based on the methodology offered in “The Logical Trader: Applying a Method to the Madness” by Mark Fisher. I am talking about intraday scalping, not longer-term trading. Astral and I have been playing with this and it looks promising.
Those of us who have been around FF for a while have benefited hugely from the teaching and advice of some formidable traders. One of these is Brijon, who drew our attention to the book in his “The Amazing Magic of 3MW “ thread at http://www.forexfactory.com/showthread.php?t=242404,
This book is freely available in pdf format, at
http://rapidshare.com/#!download|502l35|176975836|MARK_FISHER-The_Logical_Trader_Applying_A_Method_2The_MADNESS-www.dl4all.com.pdf|11774
Another download link for the book supplied by ava_ind is http://www.mediafire.com/?6gkgumyiwdphttp://www.mediafire.com/?6gkgumyiwdp
Download it and read chapters 1, 2 and 3 so that you understand the concept of The Range and The Pivot Range. Some have had difficulty with the above link, so try the one in this post if you also have a problem: http://www.forexfactory.com/showpost...1&postcount=11
astral posted this link http://www.investopedia.com/articles.../04/032404.asp to an excellent summary of the book. Reading it after reading the book will help clarify your thoughts. Reading it before reading the book will prepare your minds for what is to come. I suggest you do both.
To help further still, the ACD Breakdown.zip contains a summary of Mark Fisher's rules, provided by Hiredwhip - a contributor to take notice of when he contributes.
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The method
This is a summary of my understanding of his method:
The Range
- Select a trading range start time and a time frame in which to generate the Range:
- start time should be the normal market opening time e.g. 8.00 gmt for gbpusd (maybe 7.00 am gmt as so many European trading centres open at that time.
- time frame will be whatever tf you want to trade
- When one candle has passed after your range time start, draw a box that delineates the high and low of that candle.
- When the market trades above the box by x pips for a period of half the time-frame, this validates an 'A' point. Trade long. Stop is a few pips below the bottom of the box.
- Vice-versa for a sell.
- Once a trade is open, exit if the market does not move for a period of half the time-frame.
The Pivot Range
- Calculate the pivot of the previous day. This is:
- (High + Low + Close) / 3
- Calculate the pivot differential. This is:
- Absolute(Pivot - (High + Low) / 2
- Calculate the pivot range. This is:
- Pivot + pivot differential (top of range)
- Pivot - pivot differential (bottom of range)
- Plot lines on the chart that represent the top and bottom of the pivot range
- Trading bias is:
- short if the market opens below the pivot range
- long if the market opens above the pivot range
- neutral if the market opens within the pivot range
- Trade long following a break through the upper range line from below. Stop is a few pips below the lower range line.
- Trade short following a break through the lower range line from above. Stop is a few pips above the higher range line.
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Trade entry methods
The first picture shows a chart for GJ, to illustrate the lines that the attached ea will draw for you. The Range is turquoise; the Pivot Range is blue. I am trading the H1 chart, and so look for a trade entry signal when the market has been trading outside the box for 30 minutes.
The publish date for Mark Fisher's book is 2002; this pre-dates the ability that most of us had to trade Forex via our home computers and the book is not intended for Forex traders. This throws up some interesting features that I discovered quickly:
- forex market wave-pattern movement does not lend itself to closing a trade after half the trading tf has elapsed. Also, a pair can pause for quite some time before moving off in the direction of the trade. I abandoned this early on.
- As recommended, the stops were often hit, usually just before the market resumed movement in favour of the trade. I am not a fan of stop losses, so I quickly stopped using them. I would add a far-distant emergency stop loss to live trades to ensure against disaster, but this would be a long way away. I protect my account by trading lot sizes small enough to withstand a move of several thousand pips against me.
- The excessive volatility of Forex renders useless a lot of the techniques MF describes. Equally, it creates extra opportunities to compensate.
This method lends itself easily to personalisation. I have started by using ChaserL's Sixths indi – you will find this in the Indicators zip. This indi evolved from the work of Nanningbob in his version 5 trading thread at http://www.forexfactory.com/showthread.php?t=246113. Newbie traders, go and read the thread and trade the method manually; you will learn much about the markets and how to trade them.
Macman contacted me with an evolution of the system that I coded into an auto-trading ea. Find out about this, and the further evolution of macman's idea at http://www.forexfactory.com/showthre...=1#post4135863. You will discover how ChaserL adapted the sixths indi to create a dynamic bar count. You can also download the The Old Beast, the ea that many of us are using successfully for live trading.
The second picture shows the indi loaded onto the chart. Looking at this, even had Logical given a valid A signal, I would not have taken the trade. The market would have been at the point at which us TOB traders would be looking to go short, not long, so this makes a neat trade filter.
Another possibility is to drop down to a lower tf once we have a valid A signal, and use the ea I coded to help trade 3MW as a further signals generator. You can download and read about this at http://www.forexfactory.com/showthread.php?t=280999. I may experiment with this myself.
In the Scripts zip are two scripts to send market orders for you. To use them, drag them onto your chart, make the required changes to the inputs and click OK. Remember that IBFX are ECN even though they try to hide this.
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Trade exit methods
This is the shortest section in this post, yet it is the area that needs the most attention. At the mo, I am using a 30 pip take profit. Others will experiment with the features offered by mptm. For the newbies, Multi-Purpose Trade Manager offers many management features and can be downloaded from http://www.forexfactory.com/showthread.php?t=89371
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Dealing with 'losing' trades
In my view, we have 4 methods of dealing with losing trades:
- Stop out at a stop loss. Just because I do not favour this does not mean it is not a valid method. You can be an 'I am right or I am out' trader if you can find a way to calculate stops that are not regularly hit before the market resumes in your favour.
- Manual closure when your instinct/experience/knowledge tells you to get out.
- Nanningbob-style Recovery. Newbies, when you have visited Bob's thread you will have a good idea how this works. I have attached a pdf to summarise this to help you.
- Hedging.
This is what I am going to try this week. I opened a trade that remained in dd overnight:
- Recovery, when a new signal validates a new A in the direction of my first trade.
- Hedging at original lot x 2 when a valid A appears in the opposite direction to my first trade. Not sure what I shall do when the market reverses yet again. Possibly close the position, take the hit and cry or; hedge again – this could become messy.
iExposure is an indi that calculates the breakeven take profit on a Recovery position. You will find this in the Indicators zip.
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Thread development
We are trying to develop methods of trading based on the insights gained from Mark Fisher's book. As we develop them, I will add them to a pdf that will live as an attachment to this post.
I have no intention of coding a trading ea for all this. We may need to refine the signals generator and I can develop scripts that can use a variety of strategies for setting stops and tp's etc, but I want to develop a manual trading system that we can adopt to our tastes and styles.
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Thread rules
- Be constructive. Naysayers keep quiet. If you do not like what you read here, I invite you to say why you feel it will not work. You may not merely post along the lines of, “This is all bollocks and anybody who trades this way is an idiot.” Not twice, at least.
- Be polite.
Rule-breakers will be banned from posting in all of my threads.
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Potentially vitally useful posts
Sorry guys, but this is really for my own benefit to make sure I do not forget where these posts are. Still, you might benefit from reading them.
sq: http://www.forexfactory.com/showpost...5&postcount=59
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Logical Trader Signals Generator EA
Most of the inputs are easy to understand. Some that might need explanation are:
- RangeShift: this allows you to look back further in time in order to do some paper trading. For instance, if you wanted to paper trade 5 days ago, you would set this to 5.
- RangeStartTime: this is the start time of the candle you wish to use as your trading range. It should be the time that the market you are trading opens, expressed in your local computer time. As some examples, I am trading:
- EU, so my RangeStartTime is 07.00 – European opening.
- UJ, so my RangeStartTime is 13.00 – New York opening.
- PipsBuffer are the number of pips above/below the range hi-lo that the market has to trade beyond to validate a nes A signal. Enter this in 'proper' pips, not the points so beloved of wally-plonker-dipstick criminals; the ea automatically accomodates to x digit crims.
- PivotTimeFrame: the default calculates the Pivot Range on the D1 tf. You enter this in minutes that correspond with the tf whose Pivot Range you chose.
- PivotShift: the Pivot Range should be calculated on the previous PivotTimeFrame candle, so the default is 1. Adding to this makes Logical look further back in time for the pivot.
- CriminalHasSundayCandle: here in the UK, trading starts at 10.00 pm on Sunday nights when Tokyo gets going. To have the Pivot Range calculated using candles from Sunday night would wreck the figures, so Logical compensates on Monday by incrementing PivotShift to look back to Friday. You need to have this input enabled if your crim opens for trading on Sunday night.
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Notes for newbie traders
I do not envy you; you have so much to learn. Much of what is discussed here will leave you bewildered and confused. To get to the level of understanding that those of use who are old-stagers, requires a huge amount of reading and learning. You do not know it yet, but you have concepts to grasp that took some of us quite a long time to learn.
I suggest you follow this sequence:
- Read Mark Fisher's book and start demo-trading using Logical to trigger signals.
- Read Bob's V5 thread and learn about counter-trend trading. Do some manual trading and use Recovery to deal with the losing trades.
- Go to my The Old Beast thread and learn to use the ea and ChaserL's sixths indi.
- Go to Brian's thread and learn about his Concept of Threes trading.
- Go to my thread about the ea that trades Brian's method and learn to use it as a signals generator.
All this will take you a long time; I am describing stuff that took months to develop. Once you have finished, you will have a much better understanding of Forex trading than you could gain without paying a fortune to a professional trader to learn. You might even avoid losing all your money. Possibly.
I thought long and hard about following my customary path of limiting posting in this thread to those with 1 voucher or on my Buddy list. I have decided to do so to avoid having the thread cluttered by the inevitable newbie questions that will otherwise arise. Those of you who have expertise to offer but have not yet been vouched for by a fellow-trader at FF can get around this restriction; send me a pm to ask to be added to my Buddy list. Go to your profile page and follow the link to read about FF's voucher system and what it means.
Not many of us at FF are professionally-trained floor traders; most of us were newbs at some stage and had the most basic of questions to ask. To accommodate you newbies, I have set up a thread at http://www.forexfactory.com/showthre...0#post4484850;. Feel free to ask you rock-bottom basic questions there without fear of mockery. Someone will help you out in a supportive spirit.
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In conclusion
I have no idea whether this thread will go anywhere or not; it might be dead by this time next week. We shall see. Let's have a go and see if we can develop something of value to us all.
